"Undocked mode" refers to the state of a device or application when it is disconnected or not connected to a larger system or external components. It operates independently, without relying on any other devices or connections. Full definition
I played the game mostly in undocked mode because I think the game just looks better on a smaller screen, but it doesn't make any difference in terms of the game experience. (theswitcheffect.net)
As some enterprising and experimentally minded folks over at Reddit recently discovered, the Switch now supports wireless USB headphones in both the Switch's docked and undocked modes as of yesterday's 4.0.0 firmware update. (techradar.com)
The game being on UE4 and Switch not being hard to develop for, it's possible that they're progressing quick on it, but then again they have to optimise it for both docked and undocked mode so they would oviously have to heavily test both modes before releasing the game. (gonintendo.com)